One of the long-running legislative goals of Alaska’s recreational marijuana industry is to graduate from the original tax structure approved by voters way back in 2014, and they may get their shot with a bill moving through the Alaska Legislature.
The only problem is that the industry isn’t aligned on what should come next.
House Bill 91, authored by Fairbanks Democratic Rep. Ashley Carrick, would deliver an across-the-board cut to marijuana taxes, reducing them from a maximum of $50 per ounce of flower to $12.50, and then eventually transition over to a sales tax. The move to a 6% sales tax is expected to cut state revenue from the marijuana industry by about $4 million, reducing the annual take from about $27.2 million to $23 million.
Carrick told the House Finance Committee on Monday that the loss in state revenue is justified by concern about the health of the marijuana industry.
“It’s important to couch any conversation about potential lost revenue with this legislation with the current industry realities,” she said. “If we do nothing on this issue, the industry is going to continue to face, potentially, a very rapid decline… and we could see a potential collapse in this emerging industry if we don’t take some sort of action to alleviate the current tax structure and where that burden is placed.”
Alaska’s marijuana tax system is a holdover from the 2014 initiative with few changes. It levies a $50-per-ounce tax on flower at the grower level, regardless of the product’s potency or final price. That flat price has long chafed growers because it’s a high fixed cost on top of Alaska’s already high energy and labor costs. Since its introduction, the state has included a graduated system in which immature buds and trim are taxed at lower rates, but enforcement of what qualifies for the lower rates is largely left to an honor system.
The trend of growers classifying their products in the lower-taxed categories is why cutting the tax rate from $50 per ounce to $12.50 results in only a $4 million revenue cut. Many of the products on store shelves are already taxed at that $12.50 rate.
The move to a sales tax has long been discussed and was actually a recommendation out of Gov. Mike Dunleavy’s marijuana task force. The thinking is that it would better capture the market’s value by linking taxes to final sale prices and allowing value-added processes, such as concentrates, pre-rolled joints, and edibles, to be factored into the calculation.
But that task force’s recommendations were released three years ago.
Since then, Alaska Marijuana Industry Alliance member Lacy Wilcox told the House Finance Committee that the consensus has fallen apart, and the industry is no longer aligned on supporting a sales tax.
“The reality is that the economics of the industry have changed dramatically since then and since the governor’s task force report, which was released in January of 2023, wholesale cannabis prices have collapsed as the market matured, while production costs across the industry have increased and are projected to continue rising,” she said, adding that the industry has also faced unwelcome competition from the illegal black market. “The result is that licensed businesses are under intense economic pressure. We are currently seeing businesses close.”
She said in 2025, some 25 marijuana cultivators decided not to renew their licenses.
While she said that some businesses are still fully in support of a sales tax, others have raised concerns about the impact of a sales tax on communities where marijuana is already subject to a sales tax. In Bethel, for example, marijuana is taxed at a whopping 15%, and she warned that the state’s 6% on top of that would invite more black market competition.
“What the industry still overwhelmingly agrees on, though, is much simpler: the current cultivation tax is too high,” she said.
Wilcox suggested just cutting the wholesale tax to a flat $12.50 per ounce and keeping the other regulatory changes contained in the bill, which include a move to two-year licensing, quarterly tax collection and the expansion of tax drop-off locations. It would also allow retailers to sell unsold or spoiled products back to producers.
But any cut in taxes, regardless of whether a sales tax is at the end of it, will likely be a tough sell for legislators who’ve been consumed by the state’s ongoing budget problems. While marijuana tax revenue is a fraction of a fraction of state revenue, it’s earmarked for popular purposes, such as after-school programs for kids.
Still, Carrick warned that the trend is already showing signs of a decline in the industry as businesses go under and others rely increasingly on misclassifying marijuana as lower-taxed qualities. She said the forecasts don’t account for a healthier industry with more affordable products.
“I think what’s really important to keep in mind is that the industry is struggling very significantly right now,” she said. “The anticipation from both the governor’s task force findings and from talking to industry leaders is that we could very well see this reduction in revenue offset by increased business operations and sales.”
The bill is still in the House Finance Committee. Other legislative proposals to slash marijuana taxes have been introduced by other legislators, but none have cleared either chamber of the Legislature.